Direct taxation consists of taxes levied directly on the income of individuals and on corporate profits. In the last decade, direct taxation as a share of GDP has experienced a small increase throughout Africa, mostly in upper and middle income countries like Botswana, Morocco, South Africa, Tunisia and Zimbabwe. Overall, however, the trend in direct taxation has been flat, as Figure 11 shows.

This Outlook survey contains evidence that African countries are slowly lowering their overall personal income tax rates in an attempt to broaden their tax base. Most countries apply a progressive rate ranging from 0% to 35%. Others still have a long path of reform ahead. For instance, Togo recently lowered its rate from 45% to 40%.

Corporate income taxes have been stable across the continent. Figure 12 sheds light on the underlying trends behind this stability. First, the implicit tax base – defined by the authors as revenue, relative to GDP, divided by the (highest) statutory rate – has risen due to a rise in the share of profits in national income in African countries. Second, statutory corporate income tax rates, on the other hand, have been reduced. Combined, these two trends resulted in a net rise in the corporate income tax revenues that could be potentially raised. The third trend, however, is that African countries have granted many tax exemptions to corporations so that actual corporate income tax revenues remained flat as a share of GDP. This Outlook survey shows that corporate income taxes are reported to have been resilient, despite decreases in rates at which profits are taxed across Africa, and increases in the number and type of exemption granted by African countries to investors.